By Joe Udo
ABUJA (CONVERSEER) – The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, has projected that Nigerian states could collectively earn more than ₦4 trillion annually from 2026 when the new Value Added Tax (VAT) reforms take effect.
Oyedele made this known on Tuesday during the launch of the BudgIT State of States 2025 Report in Abuja, where he delivered the keynote address as part of the report’s 10th anniversary celebration.
He explained that under the upcoming VAT regime, states’ share of VAT revenue will increase to 55 per cent, creating what he described as an unprecedented opportunity for subnational governments to strengthen their finances and improve citizens’ welfare.
“With VAT reforms kicking in from 2026, states’ share will rise to 55 per cent. That could amount to over ₦4 trillion in 2026. The question is: will this money be spent, or will it be invested?” Oyedele said.
The fiscal expert noted that while recent economic reforms had significantly boosted the Federation Account Allocation Committee (FAAC) disbursements — from ₦5.4 trillion in 2023 to ₦11.4 trillion in 2024 — many Nigerians were yet to feel direct economic relief.
“States are receiving more money than ever before. But there is a paradox: while governments have more naira, ordinary Nigerians have less disposable income,” he observed, urging governors to channel the additional revenues into projects that directly impact citizens.
The BudgIT report revealed that 21 states still depend on federal allocations for over 70 per cent of their income — a trend Oyedele described as “worrying,” despite notable progress in some regions such as Enugu, which recorded a 381 per cent rise in internally generated revenue (IGR), and Bayelsa with a 174 per cent increase.
He further explained that the new tax laws transferring full proceeds from electronic money transfer levies to states, and exempting state bonds from taxation, would ease borrowing costs and expand fiscal space.
“This is a unique opportunity for states to build resilience, close existing tax gaps, and invest in infrastructure,” Oyedele said.
While acknowledging that capital expenditure had overtaken recurrent spending for the first time in years, he expressed concern about poor implementation levels in key sectors. According to him, states implemented only two-thirds of their education budgets — spending less than ₦7,000 per citizen — and even less in healthcare, with ₦3,500 per citizen.
Oyedele added that despite a ₦2 trillion reduction in domestic debts and a $200 million drop in foreign loans, states still owed more than ₦1.2 trillion in arrears to pensioners, contractors, and workers.
“Borrowing is not the problem; unproductive application of debt is,” he cautioned.
According to the 2025 rankings, Anambra topped the fiscal performance chart, followed by Lagos, Kwara, Abia, and Edo. Cross River State, however, slipped sharply from fifth place in 2024 to 29th in 2025, raising concerns about governance choices.
CBN Urges Fiscal Discipline
Also speaking, the Deputy Governor of the Central Bank of Nigeria (CBN) in charge of Economic Policy, Dr Muhammad Abdullahi, called on states to entrench transparency and fiscal discipline as revenues expand under the ongoing reforms.
He described the BudgIT report as a credible reference point that has consistently benchmarked fiscal performance and refocused governance conversations on capital investment and accountability.
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Abdullahi warned that subnationals remained exposed to foreign exchange risks and revealed that the CBN was developing a financial instrument to help them hedge exposures and monetise revenues.
“The challenge is to lock in this fiscal discipline permanently,” he said, urging states to digitise internal revenue systems, complete Treasury Single Account (TSA) implementation, and increase education and health budget execution above 80 per cent.
He noted that Nigeria had inherited severe economic distortions, including multiple exchange rates and excessive deficit financing, but assured that the apex bank was committed to restoring macroeconomic stability through orthodox monetary policies.
Governors’ Forum, BudgIT, Seek Transparency
In his goodwill message, the Head of Economic Intelligence at the Nigerian Governors’ Forum (NGF), Mr Razaq Fatai, who represented the Director-General, Dr Abdulateef Shittu, said the State of States report had become a crucial tool for promoting fiscal accountability and guiding state-level governance.
He highlighted that the NGF had served as a technical partner in refining the report for a decade, ensuring that its findings translate into improved decision-making and fiscal discipline.
Similarly, BudgIT Co-founder and Global Director, Mr Oluseun Onigbinde, described the annual report as a “mirror” reflecting subnational choices and their fiscal outcomes.
“This report began with a simple belief — that every kobo meant for citizens should be traceable, justified, and used to improve lives,” Onigbinde said.
He urged state governments to focus on education, health, and infrastructure, and to embrace transparency as a foundation for public trust and investment confidence.
Onigbinde concluded that Nigeria stands at a critical juncture, where sustained accountability and strategic spending will determine whether rising revenues translate into shared prosperity or renewed dependency.
